House prices suffered their biggest monthly fall since last April after dropping 2.8% between December and January.
The latest Halifax House Price Index shows it is the largest monthly drop since last April when average values fell 3.1%.
Price growth crawled upwards on an annual basis by 0.8% in January, putting average prices at £223,691.
Russell Galley, managing director at Halifax, said: “Attention will no doubt be drawn towards the monthly fall of 2.9% from December to January, the second time in three years that we have seen a drop as a new year starts.
“However, the bigger picture is actually that house prices have seen next to no movement over the last year, with annual growth of just 0.8%.
“This could either be viewed as a story of resilience, as prices have held up well in the face of significant economic uncertainty, or as a continuation of the slow growth we’ve witnessed over recent years.
“There’s no doubt that the next year will be important for the housing market with much of the immediate focus on what impact Brexit may have.
“More fundamentally it is key underlying factors of supply and demand that will ultimately shape the market.
“On the supply side the most constraining factor to the health of the market is the shortage of stock for sale, although this does support price levels.
“On the demand side we see very high employment levels, improving real wage growth, low inflation and low mortgage rates.
“All positive drivers tempered by the challenges of raising deposits. On balance, therefore, we expect price growth to remain subdued in the near term.”
Commenting on the figures, Lucy Pendleton, director of estate agents James Pendleton, said: “This is a handbrake turn as the monthly course of house prices reaches new heights of volatility.
“The air of political uncertainty and low supply is sending the market into a bit of a spin.
“The long-term holding pattern in prices ahead of Brexit is abundantly clear, and overall measures of consumer confidence have been scraping five-year lows.
“However, if the UK does enjoy a good EU exit, then a relief rally could be in store given the plentiful government support for buyers, cheap borrowing and rising wages coupled with low supply.”
Source: Property Industry Eye